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Major wire service has its own
figures for 'total pay'
Apr 19, 2007
AP drops SEC's formulation of exec comp in
favor of its own
NEW YORK -- With CEO pay making the headlines, IROs may wish to know that
the Associated Press (AP) is using its own formula for calculating total pay
from a proxy statement, not the SEC's.
It is a curiosity picked up by Kirkland & Ellis partner Robert Hayward, who
noticed the difference after reading news stories about proxy statements he
helped prepare. He has issued a client alert on the matter.
'The running assumption was that everyone would go in and take the new total
compensation number [from the SEC filing] and stick that in the headline,'
he says. 'AP was not picking out that number so I got in contact and had
them explain it.'
The discrepancy comes from AP using different figures for pension earnings
and stock and option values than those reported in the SEC's summary
compensation table. Specifically, for pensions the wire service is ignoring
the actuarial change in pension value. For stock and options, the AP is
using the FAS 123R grant date fair value of the stock and option awards
(reported elsewhere in the proxy) and not the financial accounting
compensation expense called for in the summary table.
The AP formulation, which is turning up in news stories in Yahoo Finance,
the Wall Street Journal and local
papers, is not necessarily a bad thing. 'I think it's better than the SEC's
total compensation number for purposes of trying to disclose what the
executive was offered for the year,' Hayward says.
Indeed, it more closely captures what the SEC was going for in its original
disclosure rules before a last-minute change in December. That change asked
companies to report the financial accounting compensation expense recognized
for all outstanding stock and option awards, not just awards granted in the
prior year. It is controversial because it could lead to misrepresenting the
true total compensation an executive was awarded in the most recent fiscal
year.
While there is no real right or wrong here, IROs need to know this is
happening. 'The rules are extremely complex,' says Hayward. 'There is no
easy way to make the disclosure into sound bites.
'The SEC may need to do a top to bottom review after this proxy season and
tweak the rules to make the total compensation number more reflective of
what compensation committees decide in the given year,' he adds.
by Anna Snider
© copyright 2007 Cross Border Ltd |
